S&P positioning more extended bullish than in recent US election cycles: Citi By

-- Net positioning in the is Make 100 million US dollars by speculating in foreign exchange with 4,000 US dollarsparticularly bullish ahead of the 2024 US election, according to Citi strategists, a stark contrast to the more cautious stance seen in previous election cycles.

However, strategists note that this bullishness “has been established for many months,” holding steady throughout October. In comparison, investors reduced their long positions to neutral levels a month before the 2016 election, while in 2012, markets saw a consistent neutral stance.

“While the more extended positioning in general represents a riskier setup, the fact that the election is not the likely driver of that positioning in the first place also means that the event isn’t as likely to cause a change in the trend,” strategists led by Chris Montagu wrote.

Another significant factor behind the current positioning is the difference in risk appetite between US and European equities. The +4.0 bullish positioning in the S&P contrasts sharply with a neutral stance in .

This trend is also reflected in European ETF flows, where inflows to US equities have been robust over the last couple of months, while European equities have seen net inflows stagnate.

Meanwhile, flows continue to be bullish as well, with rising net long positions maintained over the past four weeks.

“All this indicates continued confidence in US equities by investors, something which is also reflected in ETF flows which have been very strong in October,” strategists added.

They further highlight that fluctuations in bullish positioning do not appear linked to any anticipated election outcome, specifically a Trump victory. Citi observes no signs of large-scale “Trump trades” in the futures market—positions that would align with a major post-election rally, as was seen in 2016.

Instead, inflation, jobs data, and potential rate cuts are likely more influential drivers of bullish US positioning, even as the election event introduces some near-term uncertainty.

In Asia-Pacific markets, there is no evidence of strong shifts in positioning tied to the US election, with investors showing moderate bullishness in China and Japan and a slightly bearish outlook on Korea.

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